Qantas Measures Include Major Fleet Plan Changes

In addition to thousands of job cuts, Qantas has revealed plans to defer aircraft orders, accelerate fleet retirements and eliminate some routes as part of major surgery to mitigate spiraling losses.

The broad range of measures announced by Qantas will achieve its aim of cutting A$2 billion ($1.8 billion) in costs over three years. The 5,000 job cuts are the most dramatic part of the plan, although this was also widely expected. Also significant are the airline’s fleet changes, which include yet another deferral of its remaining AirbusA380 orders.

Qantas has not released specifics of when its eight A380 orders will be deferred to, instead saying it will conduct “an ongoing review of delivery dates to meet potential future requirements.” The carrier has deferred its A380s twice before in the past few years. Before the most recent delay, deliveries were expected to restart in 2017, which would have represented a gap of five years since it last received an A380. It currently operates 12 of this type.

In addition to the A380s, Qantas also is deferring the final three of the 14 Boeing 787-8 orders that are earmarked for its Jetstar low-cost subsidiary. Again, the carrier is not revealing details of when they are being deferred to. Jetstar’s A320 orderbook has also been “restructured,” which is believed to mean that a significant portion of the 100-plus orders have been deferred.

While the deferred A380 and 787 orders have not been formally canceled, industry sources say they are essentially off the table indefinitely.

In other fleet moves, the retirement of six Boeing 747-400s will be accelerated, and will now be completed by the second half of fiscal year 2016. Remaining in the fleet will be nine 747s that have been reconfigured to match A380 interiors.

To enable the quicker retirement of the 747s, Qantas plans to free up more of its Airbus A330s to enter its international fleet. The airline says it will increase the utilization of its domestic narrowbody fleet, and focusing the A330s that remain in the domestic fleet on the busiest trunk routes.

A total of 50 aircraft are to be deferred or sold, including its existing plans to retire Boeing 767-300s by 2015. The fleet adjustments contribute to an A$1 billion reduction in capital spending over a two-year period.

Qantas says it will cut or reduce capacity on certain international routes over the next 12 months. It will axe its Perth-Singapore route, and switch the Sydney-Singapore and Brisbane-Singapore flights from 747s to A330s.

The 5,000 job cuts will include a reduction of 1,500 management and non-operational positions, and some operational jobs will be cut as a result of the fleet and network changes. The total also includes heavy maintenance and catering layoffs already announced. The airline says there also will be job losses from a “restructure” of line maintenance operations.

More changes may still be looming. The carrier had earlier indicated it was conducting a broad review of assets in the Qantas Group portfolio with an eye to selling some, prompting speculation that it would at least partially sell of its frequent flyer program. The only such change announced this week is the early return of its Brisbane airport terminal lease, which will yield A$112 million.

However, the carrier says this review has identified “a number of high-quality assets of significant value.” No final decisions have been made regarding these assets, Qantas says.

The changes unveiled by Qantas were prompted by an after-tax loss of A$235 million for the six months through Dec. 31. This was consistent with the airline’s previous forecast for the period.